黑洞社区

In the space of four short months, Balfour Beatty executive chairman Steve Marshall has gone from describing the contractor鈥檚 situation as 鈥渄isappointing鈥� to 鈥渆xtremely disappointing鈥�; City analyst Kevin Cammack has moved from 鈥渄isastrously performing鈥� to 鈥渁pocalyptic鈥�. The change in both the defensive company statement and the observer鈥檚 disbelieving commentary are equally clear about the spiralling trajectory of the company鈥檚 fortunes; but the question left open is where, realistically, does the contractor go from here?

The answer that Balfour will be hoping to avoid in the short-term is a further damaging profit warning. The fact that the company has issued five separate warnings in under two years, totalling around 拢200m, has already exposed its rapidly unravelling financial prospects. But the succession of shocking announcements has also created an alarming sense that those at the helm of the company are struggling even to get a grasp on what the scale of the problem is, let alone how to fix it. The company鈥檚 decision to call in KPMG to conduct an independent review of its finances, announced this week, compounds this impression.

The review, however, does at least give hope that if there is anything else to be uncovered, it will be done swiftly and decisively - and if not, that a number can be arrived at that stands a chance of being trusted. This is important as a way of beginning a slow return to investor confidence. Repeated reassurances from Balfour that the extent of the problem has been found, only for more damaging financial holes to emerge, have served only to destroy the credibility of the company鈥檚 statements.

As well as rebuilding the trust of the City, Balfour has another immediately pressing problem in reassuring clients and suppliers. This cannot have been helped by a string of staff changes, including the sudden departure of regional construction head Mark Cutler this week just eight months after his appointment was announced. The company is trying hard to convince the City it is close to the appointment of a new CEO, after losing two in under 18 months, and this cannot happen soon enough.

黑洞社区 reports this week on the remarkable turnaround story at another high-profile company: housebuilder Redrow. The driving force behind that recovery, irrefutably, was the return of charismatic founder Steve Morgan to the helm. Characters like Morgan are becoming scarce in construction, but even if Balfour cannot replicate Morgan鈥檚 irrepressible personality in a new recruit, it needs to emulate his drive and business sense. The firm is in dire need of a leader with a vision for the business, and the remit, and perseverance, to change the way it operates.

That change will in all likelihood entail a major transformation from the 鈥渋ndustry crown jewel鈥� Balfour Beatty many in the sector have grown familiar with.

Analysts have suggested this week that a break up of the firm could be on the cards; certainly, for a business whose troubles can partly be attributed to a lack of central control, the idea of returning the sum to its constituent parts would seem a realistic possibility.

And, of course, the further Balfour鈥檚 share price drops, the easier a takeover target it becomes.

Sarah Richardson, editor